Buying a Home...What Comes First?
Ezio Magarotto
We're just getting into the market for our first home. We are intimidated by
the various aspects of this process...and they're all so important! We're
wondering what should come first in the process. Should we find a home we
like and THEN look for a mortgage? Should we be pre-approved for a certain
mortgage amount, and THEN find a home for that amount? Should we attempt to
lock in an interest rate/points deal and THEN find the house? Do we need to
select a realtor to show us homes, or can we arrange with different realators
to see the properties they represent? Additionally, we may be taking
advantage of the V.A. loan program. Has anyone used this type of loan before,
and what is your opinion of a V.A. loan as compared with a conventional loan?
Did using the V.A. limit the mortgage/interest rate you received? We have
been reading as much info. as we can get from our library, and off the net,
but can't find discussions of these issues.
Sorry for all the questions, however, I'm sure it's obvious, we don't even
know where to start with the asking, let alone the buying!
bws...@cadsmith.com
In article <5asem6$r...@vixen.cso.uiuc.edu>,
smag...@ux1.cso.uiuc.edu (Ezio Magarotto) wrote:
>We're just getting into the market for our first home. We are intimidated by
>the various aspects of this process...and they're all so important! We're
>wondering what should come first in the process. Should we find a home we
>like and THEN look for a mortgage?
>know where to start with the asking, let alone the buying!
I've got an article with 5 steps to take for home buying at my site:
http://www.cadsmith.com/newhome.htm
and a FAQ sheet
http://www.cadsmith.com/faqbuild.htm
Also we bought our first home (years ago) with VA mortgage and it's probably
the best deal around if you qualify.
Hope this helps.
Good luck,
BW Smith
I hope these help.
================================================
CADSmith Studio~~Design Services For The Building Industry
http://www.cadsmith.com/ ==== email: bws...@cadsmith.com
Jon Shemitz
> We're just getting into the market for our first home. We are intimidated by
> the various aspects of this process...and they're all so important! We're
> wondering what should come first in the process. Should we find a home we
> like and THEN look for a mortgage?
Yes. Assuming you have good credit and a reasonable downpayment, you can get a
mortgage pretty quickly. It's not uncommon for people to spend a lot of time
looking before they find a house they like - or for those determined to pay as
little as possible to have an offer accepted. For example, we were looking for a
year and made three rejected offers before we bought our house.
> Should we be pre-approved for a certain
> mortgage amount, and THEN find a home for that amount?
Yes. Go to a mortgage broker and get a good idea of what price you can afford and
the way the price of the house you buy will affect your monthly payments.
> Should we attempt to
> lock in an interest rate/points deal and THEN find the house?
No. When you're spending this much money, the last thing you need is to feel
pressured to buy.
> Do we need to
> select a realtor to show us homes, or can we arrange with different realators
> to see the properties they represent?
When you have a buyers broker, she represents *you*. She doesn't get paid until
you actually buy a house, so there will be some sales pressure, but in general
your broker will listen to what you want and try to show you houses that fit your
parameters.
The sellers agent, on the other hand, represents the seller. Their interest in
you is strictly limited to having you buy the house they're selling.
That is, the buyers agent has her own agenda, but her interests are much more in
line with yours than the sellers agent.
--
Personal Pages http://www.midnightbeach.com/jon
Programming Publications http://www.midnightbeach.com/jon/pubs
Home School Resource List http://www.midnightbeach.com/hs
Kathleen and Jim Beilstein
Check you local community college. We took a three week, one night a
week course. It was really helpfully! It was taught by a realator and
she had a mortgage loan officer in as a guest speaker.
We learned a lot about mortgages and the closing process. We ended up
building a house, so some of the stuff about "looking" for a house
didn't apply.
Good luck and happy home-ownership!
Ms. Coleman
Ezio Magarotto wrote:
>
> We're just getting into the market for our first home. We are intimidated by
> the various aspects of this process...and they're all so important! We're
> wondering what should come first in the process. Should we find a home we
> mortgage amount, and THEN find a home for that amount? Should we attempt to
> lock in an interest rate/points deal and THEN find the house? Do we need to
> select a realtor to show us homes, or can we arrange with different realators
> advantage of the V.A. loan program. Has anyone used this type of loan before,
> and what is your opinion of a V.A. loan as compared with a conventional loan?
> Did using the V.A. limit the mortgage/interest rate you received? We have
> been reading as much info. as we can get from our library, and off the net,
> but can't find discussions of these issues.
>
> know where to start with the asking, let alone the buying!
Well I don't know about the VA stuff, but from what I heard there *are* advantages
to getting a VA loan (no down payment, etc). As far as where to start, I'll tell you
what *I* did. Our circumstances are probably completely different, but I ended
up with a home that is pretty much my dream home, so we have/had the same goal.
I was *completely* clueless about house-buying. I knew I wanted to purchase a home,
but I didn't know where to start. Although I started by looking and then starting
seeking financing, I had a pretty scary encounter with my first lender choice, so
I will recommend getting pre-APPROVED first. You can get prequalified by just about
any lender over the phone, but no one will tell you how much money they are willing
to lend until they see supporting documentation regarding your finances!. BUT...you
may be out looking and just happen to find "THE HOUSE"! This could happen long
before you've secured financing...that's what happened to me. I had been riding
around in the neighborhood I was interested and not finding anything. When I secured
an agent, he gave me several listings, out of which I found only 1 house I was interested
in. After looking at it once, I thought it was "THE HOUSE". The next day, I went to
work and made an appointment with my credit union to fill out a mortgage application.
I made an offer on the home and two days later I completed my mortgage loan application.
Fortunately for me, the seller got a better offer and that deal was done. But the
processing continued while I resumed my search. Within a week, I found another home,
and this one was really "THE ONE". Unfortunately, I was tossed and turned every night
waiting for loan approval. Even though the buyers had accepted my offer, the determining
factor as to whether the home would be mine was loan approval. I know now that I would
have felt better about "shopping" if I had already been approved. And things did
get really sticky at the very end (2 days before closing) and I had to switch lenders.
This was very very scary thing for me and the buyers. So, I would say get your financing
in place first, then you can look with confidence, and sellers will know that you are
a "strong" buyer. That will weigh heavily in your favor if you are competing with
another buyer for a house.
Reading is GOOD. Read as much as you can about your options, and also really think
about $$$ --- what you want to spend and what you want to get. The more you know,
the less likely it is you'll get jerked around. Dont worry...you really can get
what you want for what you can afford if you are willing to be patient. Also, know
exactly what the lenders will need from you in order to process your application.
There is so much paperwork involved, and you may need to dig up stuff that's buried
in the deepest, darkest places. Be prepared to expose every part of your life, past
present and future. It's an overwhelming process, but if you end up with a home
you love, it's worth it.
Good luck in your search!
EMC
Kevin Zwack
As a recent home buyer, here's my two cents worth based on my experiences.
0) Gather up your paystubs, bank statements, etc. for the past three
months, as well as the past two years of tax returns.
1) Get copies of your credit report from the big three reporting
agencies. Fix the things that are screwed up.
2) Find a mortgage lender or broker. Get prequalified to see how much
house you can buy. You may want to get preapproved as well.
3) If you are buying a used house, find a realator familar with the
area in which you want to live.
If you are buying a new house, you can get by without a realitor.
(And you might be able to talk the builder into knocking some
dollars off the price of the house which would normally pay the
realitor's fee.)
4) The VA loan program is a GOOD deal, and there are also good
programs in place for first-time home buyers. Check with your
mortgage person for info.
There are many more steps involved. Consumer Reports has a great book
on home buying, which I highly recommend for beginners.
Good luck.
Kevin Zwack
Denver, CO
Timothy Sutherland
Ezio Magarotto wrote:
>
> We're just getting into the market for our first home. We are intimidated by
> the various aspects of this process...and they're all so important! We're
> wondering what should come first in the process. Should we find a home we
> like and THEN look for a mortgage? Should we be pre-approved for a certain
> mortgage amount, and THEN find a home for that amount?
>>>>Getting pre-qualified or pre-approved puts you in the position of KNOWINGhow much money you can get and of being on equal footing as a cash buyer.
Should we attempt to
> lock in an interest rate/points deal and THEN find the house? Do we need to
> select a realtor to show us homes, or can we arrange with different realators
> to see the properties they represent? Additionally, we may be taking
> advantage of the V.A. loan program. Has anyone used this type of loan before,
> and what is your opinion of a V.A. loan as compared with a conventional loan?
> Did using the V.A. limit the mortgage/interest rate you received? We have
> been reading as much info. as we can get from our library, and off the net,
> but can't find discussions of these issues.
>>>>The VA loan is great. You need to get you certificate of eligibility and DD214from the VA to have when you apply for a VA loan. The max. loan amount is $203,000.
VA allows for 0% down to that amount, if you go over, you need to make up the
difference. VA allows 41% of your gross monthly income to be used for your bills,
including house payment, they also have a provision to allow you to exceed that
percentage. You want a lender that is LAPP approved with VA, rather than a broker
as it will be much less hassle for you and the approval time is quicker. You may also
negotiate for the seller to pay all your closing costs with VA. With VA, you won't be
able to lock in a rate ahead of time without a property.
Timothy Sutherland / Mortgage Banker
First Home Mortgage / Maryland, Del, DC, Va., and Pa. 1-800-644-6631
Nancy C Reynolds
smag...@ux1.cso.uiuc.edu (Ezio Magarotto) writes:
In my opinion, the first thing is to figure out how much money you think
you can comfortably make in a mortgage payment each month, taking into
account that you will have to be paying for insurance and taxes as well
and possibly private mortgage insurance if you're putting less than 20%
down. (I don't know what the requirements of the VA program are, though.)
You can find out from a banker (or probably someone here) what kind of
mortgage that means you need to have. I *highly* recommend that *you*
decide what you can afford and absolutely not go with a higher figure
just because some banker or mortgage broker says you can afford it. We
qualified for a house that was about $20,000 more than we wound up
buying. Let me tell you, we would have been hurting pretty badly if we'd
gotten that house! A mortgage broker or banker has a formula for your
area for the maximum you can afford in a monthly mortgage. This does not
take into account your lifestyle. Let's say, for example, that you have
$200/month in bills or other expenses that you don't have to report to
the mortgage broker, like a cable bill, regular restaurant bills, etc.
that you feel you can not give up and still be happy. It is one thing to
have to cut back on expenses for awhile right after you buy a house
because there are *so* many things you have to buy right away that are
really expensive, like a refrigerator, or that add up quickly like extra
trash baskets now that you have more rooms, wallpaper and paint, new
lightswitch covers because you don't like the cruddy ones that came with
the house, etc. (Some of us feel that in the first few months after
buying a house, we *personally* are keeping Home Depot and Sears in
business!) However, I don't think you're being realistic if you're
deciding to give up all but basic cable service when you are used to
watching premium channels all the time...or giving up your skiing
weekends when you're used to those, etc. So, decide first what you can
afford and *then* see a mortgage banker or broker--or even just call one
on the phone--and find out if the bank thinks you can afford *at least*
that much!
After you decide that you can afford houses in a certain price range,
start going to open houses. They are often listed in the Sunday real
estate section of your local newspaper. Try to determine what area you
want to live in and visit enough houses so that you start to have a sense
of what is a reasonable price for that area. One of the first houses we
saw was *gorgeous*. It had a "Wow!" kitchen, lovely parlors (they really
did seem more like parlors than living rooms), bedrooms, etc. I didn't
realize then that we could not afford it and frankly, it's a good thing
we couldn't! It was a $180,000 house on a street where the next most
expensive house besides one was only about $150,000. That would be
just fine for people who planned to live in that house until they
died, but if they ever thought they would sell it, forget it! Indeed,
the people who owned that house had such a terrible time that they took
it off the market. By getting to know the market for an area, you are in
a significantly better bargaining position later.
I suggest you make a list of what you 1) must have, 2) want, and 3) pipe
dreams, but you probably won't get. Think very, very seriously before you
buy a house that does not have everything you truly need. A house that
has even one item on you "pipe dream" list and has everything in category
one and some things in category two is worthy of serious consideration!
For example, when we were looking for our first house (this one), I
decided the house had to have more space in all respects than the
apartment I was living in, otherwise there was no good reason to move. At
the bare minimum, it couldn't have *less* space. We did look at a
beautiful house, but it needed a lot of work and had even less closet
space than my apartment--truly an amazing thing. Although I have not been
in the house since we were prospective buyers, I have been by it. The new
owners have turned the outside into a showplace and have obviously sunk a
lot of money into it. Be realistic. Are you the kind of person who is
willing and able either to do a lot of work around the house yourself or
to hire contractors and oversee them doing it? My husband found a house
that he liked, but I said no. A major portion of the space had panelling,
which we knew we'd want to remove. There was no drywall underneath. My
husband said he'd do it. Yeah, right! I have known that man a long time
and I knew there was no way he'd do it! I didn't want to have a
torn-apart-room for who knows how long! I knew our level of house
do-it-yourself was to repaper and paint--slowly at that. Since we moved
here three years ago, we have made a few changes to the house besides
repaper and painting, but you can be sure that if the previous owners saw
the house, it would look *very* familiar. Sure, I wish we were more the
do-it-yourself (DIY) type, but hey, we just aren't. Don't think about who
you "should" be, but who you are and buy accordingly. We needed a place
that was in "move in" condition.
Despite what I said about looking at houses in your price range, I do
recommend that you look at a handful of houses that are a little above
your range and a little below. You may find that you like the houses
that cost a little less and that the ones that cost a little more
aren't really all *that* much nicer, so you don't have to waste time
being envious. Anyway, after we were told we could afford a house
in the $150k's, we no longer wanted to look at houses costing less. Then
one day, the Realtor took us around (for the umpteenth time) to see more
houses. I was looking on the fact sheet for one where the asking price
was $139,000. I didn't know why the Realtor had gone back to the lower
price range and, to be frank, I was a little pissed off that she was
"wasting our time." Well! As soon as I saw that house--this house--I
liked it immediately! I am *so* glad she showed it to us! I am even more
glad now that I know that with *our* lifestyle, we would have been very
unhappy in a more expensive house, at least for the first few years before
income increased.
If you want any other tips about buying a house, feel free to email me.
It's quite an adventure!
--Nancy Reynolds
Lew Stead
> I *highly* recommend that *you*
> decide what you can afford and absolutely not go with a higher figure
> just because some banker or mortgage broker says you can afford it. We
> qualified for a house that was about $20,000 more than we wound up
> buying. Let me tell you, we would have been hurting pretty badly if we'd
> gotten that house!
I cannot agree more highly. We purchased a house that was a little ($100)
more than we thought we could afford, we "qualified" for almost TWICE that.
I don't know what they were smoking, but there was no possibility we could
ever have paid that much. In addition, your de-facto living costs go up
when you buy because now that you have something permanent, you start to
buy things for the house that you otherwise might not have. The trips to
the home depot can really add up. You pick up art and other decorating
stuff that you might not have for a place you knew you would be leaving
after a year or so.
But it's very tempting when an authority figure says "oh, you can afford
the big house" and gives you the rap about big tax savings and all that
(from my initial figures, we'll make out better on the standard deduction,
even with a few points from the purchase!). Plus, all the brokers
(including your buyer broker) make more $ if you buy a bigger house, so
they all have a monetary interest in selling you more house than you can
really afford.
Lew
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Paul Michael Brown
IMHO, the first thing you should do is construct a spreadsheet that
analyzes all the financial details of the transaction. (This can be easily
done using any of the popular s.s. software. I did mine in WordPerfect if
you can believe that!) Your spreadsheet will allow you to run all the
various scenarios for a given transaction and permit you to determine
accurately all kinds of important numbers like: how much cash you'll need
at closing, how much your PITI will be, what your LTV will be and what
your front and back end ratios will be, what your pre-tax monthly costs
will be and what your after-tax monthly costs will be. (If you don't know
what those things are, you should read up before you construct the
spreadsheet.) Your spreadsheet will be your friend, because it will allow
you to crunch the numbers at a moments' notice. Otherwise, you will rely
on calculations performed by others. This is not a good idea.
Nigel Ziyad
Hi!
In addition to what others wrote, I found that I needed a lawyer to
read the contract. I ended up cancelling one contract with a lot of
headache (they wanted to keep my money). The second time around was
better after the contract was review by a lawyer. So read any contract
with a fine toothed comb or get a lawyer. If you are interested I can
recommend a service for $25/month.
Nigel
Ezio Magarotto wrote:
>
> We're just getting into the market for our first home. We are intimidated by
> the various aspects of this process...and they're all so important! We're
> wondering what should come first in the process. Should we find a home we
> like and THEN look for a mortgage? Should we be pre-approved for a certain
> mortgage amount, and THEN find a home for that amount? Should we attempt to
> lock in an interest rate/points deal and THEN find the house? Do we need to
> select a realtor to show us homes, or can we arrange with different realators
> to see the properties they represent? Additionally, we may be taking
> advantage of the V.A. loan program. Has anyone used this type of loan before,
> and what is your opinion of a V.A. loan as compared with a conventional loan?
> Did using the V.A. limit the mortgage/interest rate you received? We have
> been reading as much info. as we can get from our library, and off the net,
> but can't find discussions of these issues.
>
Nancy C Reynolds
While this sounds like a good idea in general, please note that sometimes
you can get to closing and wind up with unexpected costs--expenses higher
than the "good faith estimate." We were really shocked by the bank's
lawyer charging a few hundred dollars more than we expected and by other
picky charges that added up. What we did in anticipation of *something*
unexpected happening was to put big purchases (like a refrigerator, washer
and dryer) on a credit card so that we would not be cash poor the day
after closing if something didn't go as we expected. We did this even
though we could have paid cash for those items. So, don't calculate down
to the last dollar and figure it won't cost you a penny more. Closing can
be a *very* rude awakening.
--Nancy Reynolds
Timothy Sutherland
Nancy C Reynolds wrote:
>
> pa...@mirror.his.com (Paul Michael Brown) writes:
>
> >IMHO, the first thing you should do is construct a spreadsheet that
> >analyzes all the financial details of the transaction. (This can be easily
> >done using any of the popular s.s. software. I did mine in WordPerfect if
> >you can believe that!) Your spreadsheet will allow you to run all the
> >various scenarios for a given transaction and permit you to determine
> >accurately all kinds of important numbers like: how much cash you'll need
> >at closing, how much your PITI will be, what your LTV will be and what
> >your front and back end ratios will be, what your pre-tax monthly costs
> >will be and what your after-tax monthly costs will be. (If you don't know
> >what those things are, you should read up before you construct the
> >spreadsheet.) Your spreadsheet will be your friend, because it will allow
> >you to crunch the numbers at a moments' notice. Otherwise, you will rely
> >on calculations performed by others. This is not a good idea.
>
> While this sounds like a good idea in general, please note that sometimes
> you can get to closing and wind up with unexpected costs--expenses higher
> than the "good faith estimate." We were really shocked by the bank's
> lawyer charging a few hundred dollars more than we expected and by other
> picky charges that added up.
Less stress for everyone.
Cindy Brunner
In article <E423s...@world.std.com> na...@world.std.com (Nancy C Reynolds) writes:
>From: na...@world.std.com (Nancy C Reynolds)
>Subject: Re: Buying a Home...What Comes First?
> [snip] Closing can be a *very* rude awakening.
Boy, ain't THAT the truth!!! We "closed" on some property 3 years ago, and
"unclosed" ("opened"?) the very next day. During the closing, the seller's
realtor made us a verbal assurance of something in front of the
seller and the seller's attorney (and with their concurrence). We signed the
paperwork, with the understanding that what the realtor had promised would
actually be correct. (He was going to check on it later that day...). The
next day, the seller's attorney telephoned us to say we could call off the
deal if we wanted, because the realtor had been wrong. By then, we had
SERIOUS second thoughts about the purchase anyway, so we eagerly accepted the
return of our earnest money and the papers with VOID written all over them. I
think we were extremely lucky. Or they were extremely honest.
CJB